USD/HKD darts higher as Hong Kong’s Hibor rate pulls back

on Mar 23, 2023
  • The USD/HKD exchange rate rose slightly after the latest Fed interest rate decision.
  • The Fed decided to hike interest rates by 0.25% in a bid to fight inflation.
  • In Hong Kong, the Hibor rate dropped to 1.94% on Thursday.

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The Hong Kong dollar hovered near the lower side of its USD peg after the latest interest rate decision by the Federal Reserve. The USD/HKD was trading at 7.8492, a few pips below the upper side of the peg range of 7.8500.

Hong Kong slow recovery

The Hong Kong economy is sending mixed signals as it moves from the Covid-zero strategy. For example, the real estate sector is seeing a slow comeback as money continues flowing from mainland China to the city. 

For example, according to Bloomberg, a Chinese entrepreneur has bought a mansion for over $150 million in Hong Kong. There have been several large property sales in the past few weeks. 

However, the crucial tourism sector is yet to recover even after the government unveiled a giveaway for half a million airline tickets to bring in tourists. For example, the city welcomed over 500k visitors in January, lower than 6.8 million in the same month in 2019.

Further, the Hong Kong Convention and Exhibition Center has barely been used recently. Cathay Pacific’s recovery has been slower than other airlines like United and British Airways. 

The challenge for Hong Kong is that its population has continued dropping in the past few years, leading to a major brain drain. At the same time, some international businesses have decided to move to Singapore after the city brought in the National Security Law. 

The USD/HKD price is reacting to the latest Federal Reserve interest rate decision. In a statement, the Fed decided to hike interest rates by 0.25% for the second meeting straight. That move will force the Hong Kong Monetary Authority (HKMA) to also hike interest rates by a similar percentage point. 

Data published by Bloomberg showed that demand for cash dropped on Wednesday, pushing overnight borrowing rates sharply lower. The Hibor declined by 175 basis points to 2.4% after it jumped by the highest level in 17 years on Tuesday. The Hibor pulled back to 1.94% on Thursday. 

USD/HKD technical analysis 


USD/HKD chart by TradingView

The USD to HKD exchange rate drifted upwards slightly on Thursday after the Fed decision and as the Hibor rate dropped to 1.94%. It moved closer to the upper side of the range at 7.8500 and crossed the 50-period moving average. 

Therefore, the pair will likely continue rising as buyers target the next key point at 7.850. Because of the peg, and Hong Kong’s vast financial resources, the pair will not move above the upper band of the peg.


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